13 Oct How can I rebuild credit after bankruptcy?

 Q. After a bankruptcy, I’m trying to do the right thing with my money. I don’t have a credit card and I don’t really want one, but there are times when it seems that’s the only way to pay. How do I go about getting a card given my bad history?

A. Start slow, and have a plan.

Many banks and financial institutions offer what’s called a secured credit card.

From the outside, it looks like any other card. But it’s really attached to a bank account that you use as collateral for the lender.

“The individual opens a savings account with the banking institution with anywhere from $300 to $3,000 and the bank will issue them a credit card with a credit limit equal to that deposit,” said Steven Gallo, a certified public accountant with U.S. Financial Services in Fairfield.

Over time, as you use the card and make timely payments, the bank will usually begin to raise the credit limit without requiring additional money be deposited into the savings account, Gallo said. It may eventually offer you a non-secured card as it sees you’re a good risk.

“This is a good way for a person to begin to rebuild their credit as well as have a credit card to use in those situations that demand one,” Gallo said.

A secured card can be a great tool to rebuild your credit, said Sally Herigstad, a certified public accountant and columnist with CreditCards.com.

“It’s not a bad deal — it’s hard to get far into debt using this type of card,” she said. “After a bankruptcy, staying out of debt – permanently – should be your top priority.”

She said the activity on a secured card will help you rebuild your credit history, just like any other credit card.

Plus, Herigstad said, creditors are not flooding recent bankruptcy filers with credit card offers, as was the case in the past. But don’t automatically assume that you cannot get a traditional credit card after bankruptcy.

“You might be surprised,” she said. “Creditors know that since you just filed for bankruptcy, you won’t be doing it again in the near future.”

She also recommends you consider a department store or home improvement store card because they can be easier to obtain.

Gas station cards are good ones to start with, too.

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This story was first posted in October 2015.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.